EROS Now Switches To A Freemium Model

Eros Now, the online movie streaming from movie production and distribution house Eros International shifted to freemium model last quarter, the company mentioned on its earnings conference call. Until this change, Eros had a premium movies only offering online, even though it had progressively reduced prices, as we’d mentioned in our story in September last year: it had brought down subscription rates to Rs 25 per month, in a possible bid to increase signups, while pricing had earlier been $4.99/month, which was later reduced to $2.99/month.

How Eros Plans To Approach Freemium

There are essentially three parts to the EROS model going forward:

– Advertising for free content, for which revenue will come from brands. For EROS Now, its largest amount of traffic is from India. The company believes that the Freemium model is the “quickest and lowest hanging fruit of monetizing traffic from India is from the business or advertisers and brands, rather than the consumer itself in the – in the next two to three years. And that may change once 3G, 4G and broadband penetration becomes more effective within India.”– Transactional, for which revenue will be from customers directly, by premiering movies four or six weeks from the theatrical release on pay-per-view basis. EROS plans to “premier” films on Eros Now, four or five weeks after its theatrical release and “we’ve seen a lot of transactional traffic come through when we promote those kind of initiatives as well.”– Subscriptions, for which revenue will be from customers directly. Deshpande said that “In the short run, we think the subscription revenues will come from the international markets, like American, U.S., Canada, Europe, Australia, where broadband penetration is much better and user experience is much better. And also, the Indian films are not as widely distributed as they are in India.” Internationally, the largest traffic coming from USA and Canada, followed by Europe, followed by Australia and some parts of Middle East, and these are the strongest areas where the company is getting conversions.

Deshpande cited the Spotify example to justify the freemium strategy, saying “you get to access content or songs or music free and then if you want portability or if you want an ad-free environment or if you want to transfer it across devices or if you want to be able to share it with your family, then you create a premium service.”

The difference between 2006 (when Rajshri launched similar offerings) and this time, is that Eros has YouTube to promote its offerings. The Eros Now channel on YouTube, the company said, offers only short-form content, and has crossed over 1.7 billion video views, generating over 18 million video views each month. “This is the traffic that we will be actively converting,” Group CEO & MD Jyoti Deshpande said. However, Deshpande said that the premium model hasn’t been a failure: “I think the premium model has had a massive take-up. We’ve seen sort of people dialing the service you know we started signing up thousands of registrations every day and we’ve not even started marketing the service…we’ve been speaking to a couple of large advertising agencies as well, who seem very excited about the possibilities of brands coming along on board and doing 360 degree dial-ups starting from in-firm to the firm marketing on to Eros Now.”

We’ve seen this pricing model change play out before: there’s a massive gulf between Free and Re 1, and over the years, the business model changes have been fairly predictable: you start with a premium offering, lower prices, go freemium, and when none of it works, and you aren’t able to build out a destination, you switch to a YouTube model. We’d put together the following overview of how the online video space in India had been evolving till 2008:

In general, all three models have failed, but it looks like we’re now starting over, probably doing most of the same things, with perhaps marginally better success than before. Advertising on video has been largely pushed by the success of YouTube in India, and this new advertiser base is perhaps what Eros hopes to tap in to. However, the CPM rates today are around $2-3 in India, which offers little revenue to a company unless it operates at scale, and probably doesn’t even cover the cost of streaming.